US: Manufacturing sector is already in recession – Wells Fargo

US Industrial Production in the US fell 0.7% in December and November’s numbers were revised lower. With industrial production having fallen in six of the past eight months, the largest of which being November and December, it is evident that the manufacturing sector is already in recession, said analysts at Wells Fargo.

Key quotes:

“This is not an encouraging report for industrial activity particularly for the manufacturing sector which comprises roughly three quarters of all output and where the decline in December was a larger 1.3%.”

“Manufacturers are not blind to the challenges they face. Slower demand for consumer goods, higher borrowing costs and fear of recession are all weighing on activity. In our own discussions with clients, many of them have been intrigued by the deviating dynamic between a slowing in U.S. industrial production and still elevated industrial backlogs and trying to figure out when those will converge.”

“While we suspect the slowdown in activity doesn’t bode well for overall economic growth, the fact that manufacturers are more ‘wise to the game’ this cycle suggests they may be better positioned to weather an economic slowdown.”